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Team Asset Management offer their weekly round-up of global markets
Global markets rallied last week after digesting narrative-changing economic data which helped to alleviate some of the pain from October.
US stocks had their best week in a year as softer labour market data led investors to bet that interest rates in the US had peaked. The technology-focused Nasdaq finished the week 5.7% higher, leading the blue-chip S&P 500 index which gained 4.8%.
Central banks played a major role in driving markets forward last week. The US Federal Reserve announced it would hold interest rates steady on Wednesday evening at a 22-year high of between 5.25% and 5.5%. Although Fed chair Jerome Powell warned that additional rate hikes would remain an option based on prevailing economic conditions, most investors interpreted the pause to mean we have reached the end of the interest-rate-hiking cycle in the US. Money market futures are now pricing the Fed’s next move as a rate cut before the middle of next year.
The message was the same across the Atlantic and the Bank of England’s Monetary Policy Committee also voted to leave interest rates unchanged on Thursday. In the split 6-3 vote, the majority of members on the committee expressed concern over the medium-term outlook for the UK economy.
The central bank said growth would remain “well below historical averages” and warned of a stagnating economy as the higher cost of living squeezes household incomes. There is also some political sensitivity around hiking interest rates too far, with the possibility of a general election next year in the UK.
A weaker-than-expected Non-Farm Payrolls for October was another catalyst for last week’s rally across financial markets, reinforcing the view that the Fed is done with raising interest rates. It was revealed that 50,000 new jobs were created in the US last month, below consensus forecasts of 180,000, and just over half of September’s figure.
The US unemployment rate also ticked up from 3.8% to 3.9% and the increase in average hourly earnings slowed to 4.1% year-on-year.
The third-quarter corporate earnings season continued and Apple announced its results after hours on Thursday evening. While its revenue of $89.5 billion beat forecasts, its shares fell after management warned that the revenue in the upcoming quarter would struggle to exceed that generated in the same period last year.
Although chief executive Tim Cook stressed that early sales of the iPhone 15 were doing better than the iPhone 14, revenue from greater China came in at almost £2 billion below expectations and sales of Mac computers and iPads both declined during the quarter.
Shares in Ryanair, Europe’s largest airline by passenger numbers, climbed after it forecast a record annual profit which will enable it to pay a regular dividend for the first time in its history, starting with a 400-million-euro distribution over the next year.
This budget airline has had its busiest summer ever and the strong post-Covid-19 pandemic rebound in air travel has allowed it to push through price hikes without denting demand for seats. It predicts full-year profit for the year ending in March will be between 1.85 billion and 2.05 billion euros, which would eclipse its previous record set in 2018.
In the commodities space, Brent Crude Oil faced further weakness as fears of an escalation in the Israel-Hamas conflict subdued somewhat, yet the situation remains volatile, with no definitive end in sight. The price of Brent crude slipped more than $2 to $85 a barrel. Precious metals, including gold and silver, also drifted lower on hopes that other parties would not be drawn directly into the conflict.
